State of football finances

[silent majority]

The recent Deloitte report on football finances is interesting, but rather than reading all of it I thought you might like the bullet points;

•   Report acknowledges significant change being driven by FIFA and UEFA, stating the coming months promise important debates and decisions
•   EPL contributions to pyramid and charity £200M, agents payments £211M
•   Combined annual EFL wages cost topped £1B for first time
•   Championship claimed record revenue, but also record wages (in excess of revenue) and record operating losses (£361M)
•   L1 losses worsened, albeit skewed by teams relegated from Championship
•   EPL wage to revenue 59% (only 5th time in 20 years under 60%). Average club wage costs were £142M. Interesting to note that Spurs operated at 39%, only the third club in 20 years
•   However 8 clubs reported in excess of 70%, UEFA’s FFP warning level, but 19 out of 20 still reported operating profits, albeit this drops to 13 for pre-tax profit/loss (this includes things like player trading and financing costs)
•   Net debt of EPL clubs increased by £1B to £3B, two thirds of increase is driven by soft loans, a significant amount from promoted clubs
•   £2.1B contributed by football to HMRC in taxes – one reason Govt is always nervous of pressuring the EPL
•   Three EFL clubs had parachute payments accounting for 65-75% of total revenues
•   In 2012-13 the gap between a relegated EPL club and a promoted Champ one was £43M, it is now £94M. In the same period the gap of wage bill of a relegated Champ club and a promoted L1 one has grown from £13M to £21M
•   Total Championship wage cost ratio rose to 106%
•   With the end of financial year 2019 we expect to see further clubs falling foul of the Profitability and Sustainability rules and suffer points deductions like Birmingham
•   On a positive note Champ debt fell by 47%, caused by relegations & promotions and some debt to equity conversion, but three clubs still hold debt in excess of £100M
•   Interestingly it is the Championship where the coefficient showing wage costs v performance is least effective
•   L1 wage ratio went up to 94% its highest ever, L2 up 78%. Having been brought under control it now looks like lower league clubs are pushing the boundaries of FFP and SCMP.
•   Only two Champ clubs reported a profit, 12 reported losses in excess of £10M, highest being £49M (Wolves)
•   L1 pre tax losses more than double to £81M, skewed a little by Blackburn & Wigan but losses still increased significantly across the others
•   L2 losses actually decreased to £10M
•   Capital expenditure in the EPL is high at £629M, Champ clubs spent £48M, L1 clubs spent £11m, L2 £2M

[Guernsey Exile]

That's some big numbers Martin. Out of interest could you say the ultimate outcome if some of those figures sustained over a number of years?  More clubs going out of business? The EPL bubble bursting?

[firestarter]

I remember listening to Craig Johnstone about the state of football finances and he was convinced it will implode someday.. I tend to agree with him. Sky TV and the Murdochs have ruined the people’s sport . It’s no longer sport in fact and the amounts of money being chased are nothing short of obscene.

[DonnyBazR0ver]

I read the report, certainly the significant bits, and it highlights the gaps in respective divisions of the income to expenditure. Some top clubs earn huge amounts from commercial revenue compared to others however there is some evidence of financial prudence.

There is a warning for clubs chasing the dream and taking huge risks.

There's also reference to clubs not being obliged to publish their full accounts and only being required to submit their summary accounts and the report suggests it should become compulsory to do so for the sake of transparency.

Maybe worth a read if you're interested in this sort of thing.

[DonnyBazR0ver]

https://www2.deloitte.com/uk/en/pages/sports-business-group/articles/annual-review-of-football-finance.html

You can download the report from this link

[silent majority]

That's some big numbers Martin. Out of interest could you say the ultimate outcome if some of those figures sustained over a number of years?  More clubs going out of business? The EPL bubble bursting?

The first bullet point on my list is key to what happens everywhere else. I pointed out on this forum a few weeks back that if UEFA do reform the Champions League it will have repercussions all the way down the football pyramid. Its something the EPL and EFL are extremely worried about.

[since-1969]

Wage capping throughout the leagues is what is required .Levy a  Tax the big spenders more to provide a for the lower leagues to flourish with £20 max on ticket prices  . Let the lower leagues keep an open transfer window between themselves and loans only from FPL and Championship clubs .

[NickDRFC]

Thanks for the summary, look forward to reading the reply when I have a bit more time.

The point that struck me the most there was this one:

“On a positive note Champ debt fell by 47%, caused by relegations & promotions and some debt to equity conversion, but three clubs still hold debt in excess of £100M”

Firstly to have 3 clubs with £100m debt (presumably net debt as well) is showing just how much of a risk that clubs are taking to reach the PL. I also don’t think that the other points are particularly positive for debt reduction - the debt to equity conversions are great if you have generous owners like ours willing to do it, but it’s reliant on the owners - and surely the promotions and relegations counting towards a debt reduction just means higher debt in the PL or League One?

Interesting also that payments to the pyramid and charity are grouped together although I suppose they are one and the same - not entirely surprising but still a shame that they’re outweighed by agent fees.

[silent majority]

There's some very interesting stats in there. I thought this one was intriguing from a DRFC point of view;

   In 2012-13 the gap between a relegated EPL club and a promoted Champ one was £43M, it is now £94M. In the same period the gap of wage bill of a relegated Champ club and a promoted L1 one has grown from £13M to £21M

[jmt23]

Makes you realise that crowds of 6-7000 can never compete, unless you have people pumping money in, which I find ludicrous. You can't help but be grateful to the board, but they are equally part of the problem.